A 3-Month Retrospective: Re-Considering The V-Shaped Recovery Curve
Last July, I wrote an article explaining a projected real estate recovery scenario for the Tampa Bay area developed by Moody's Economy and published in Forbes Magazine.
This recovery model suggested that our area would have a V-shaped recovery curve. A V-shaped curve calls for a fast market fall, followed by a market that bottoms out quickly, and then a fast and strong climb back to a normally active market. The chart of such activity looks like a "V", as you can imagine.
Moody's based this model on their opinion that our market had two things going for it:
1. The strength of the local economy;
2. Subprime mortgage lending was relatively low here.
They blamed the problems in our real estate market on overactive real estate speculators who drove prices up to unsustainable levels. Moody's further predicted that the unsold inventory of property here would be sold off during the first quarter of 2008 because it was comparatively undervalued, and that the market would then recover so strongly that we would see real estate prices jump upward at a rate of 10.6% during the following 12 months.
No kidding! That's what they predicted.
Let's take a look at what we now know.
Lack of subprime mortgages? We now know that this part of Florida had way more than it's share of subprime mortgages. This has resulted in our being among the nation's leaders in subprime mortgage foreclosure rates, and that those "problem mortgage" properties continue to swell the inventory of properties for sale.
So much for Moody's contention that subprime lending was not a problem here.
Strong economy? The Bureau of Labor Statistics has just released data, published in the St. Petersburg Times on October 19th, that Pinellas County ranks FIFTH in the nation in job loss for the twelve months ended March, 2007. The county lost a total of nearly 5,400 jobs during that 12 month period. Is it any wonder that public school enrollment is down in the county?
So much for Moody's second contention that the local economy is strong.
Strong local economy and low subprime lending. Those were the two points upon which the V-shaped recovery curve was put forward by Moody's and published in Forbes. Kinda makes you wonder if these guys were really doing their homework, doesn't it?
Look, there could still be a V-shaped recovery. I hope there is. It would be to my advantage for goodness sake. The thing is, I don't think we're finished with the sickness yet. Until this disease runs its course, I think it is too early to talk about recovery. I think there is more to come. Some of it will not be nice. Some of it will impact non-real estate related industries. To say things will be better in the first quarter of 2008 is wishful thinking in my humble opinion. There are just too many hurdles that need to be overcome before we can talk about a real estate recovery -- V-shaped or otherwise. And even having big-shots like Moody's and Forbes say otherwise doesn't make it so.
Here's something else to put in the back of your mind -- but not too far back.
The U.S. dollar is trading ever weaker against both the Euro and Canadian dollars. Today, that weak dollar sent oil over the $90 per barrel mark in a price increase that experts say has nothing to do with supply-and-demand. It has to do with a weaker American economy. If you remember the Nixon/Carter years, you've seen this kind of thing before. How do you spell recession? And what would a recession do to the V-shaped curve and the much anticipated real estate recovery? I know, I'm just borrowing trouble. Being negative. It'll never happen. You can't apply things that happend back in the day to what will happen today. That would mean you studied -- what's that course they don't teach much in school anymore -- oh yeah, history.
For more information on real estate in the Tampa Bay area, please visit my blogsite at http://www.thestpeterealestatesite.com/.
This recovery model suggested that our area would have a V-shaped recovery curve. A V-shaped curve calls for a fast market fall, followed by a market that bottoms out quickly, and then a fast and strong climb back to a normally active market. The chart of such activity looks like a "V", as you can imagine.
Moody's based this model on their opinion that our market had two things going for it:
1. The strength of the local economy;
2. Subprime mortgage lending was relatively low here.
They blamed the problems in our real estate market on overactive real estate speculators who drove prices up to unsustainable levels. Moody's further predicted that the unsold inventory of property here would be sold off during the first quarter of 2008 because it was comparatively undervalued, and that the market would then recover so strongly that we would see real estate prices jump upward at a rate of 10.6% during the following 12 months.
No kidding! That's what they predicted.
Let's take a look at what we now know.
Lack of subprime mortgages? We now know that this part of Florida had way more than it's share of subprime mortgages. This has resulted in our being among the nation's leaders in subprime mortgage foreclosure rates, and that those "problem mortgage" properties continue to swell the inventory of properties for sale.
So much for Moody's contention that subprime lending was not a problem here.
Strong economy? The Bureau of Labor Statistics has just released data, published in the St. Petersburg Times on October 19th, that Pinellas County ranks FIFTH in the nation in job loss for the twelve months ended March, 2007. The county lost a total of nearly 5,400 jobs during that 12 month period. Is it any wonder that public school enrollment is down in the county?
So much for Moody's second contention that the local economy is strong.
Strong local economy and low subprime lending. Those were the two points upon which the V-shaped recovery curve was put forward by Moody's and published in Forbes. Kinda makes you wonder if these guys were really doing their homework, doesn't it?
Look, there could still be a V-shaped recovery. I hope there is. It would be to my advantage for goodness sake. The thing is, I don't think we're finished with the sickness yet. Until this disease runs its course, I think it is too early to talk about recovery. I think there is more to come. Some of it will not be nice. Some of it will impact non-real estate related industries. To say things will be better in the first quarter of 2008 is wishful thinking in my humble opinion. There are just too many hurdles that need to be overcome before we can talk about a real estate recovery -- V-shaped or otherwise. And even having big-shots like Moody's and Forbes say otherwise doesn't make it so.
Here's something else to put in the back of your mind -- but not too far back.
The U.S. dollar is trading ever weaker against both the Euro and Canadian dollars. Today, that weak dollar sent oil over the $90 per barrel mark in a price increase that experts say has nothing to do with supply-and-demand. It has to do with a weaker American economy. If you remember the Nixon/Carter years, you've seen this kind of thing before. How do you spell recession? And what would a recession do to the V-shaped curve and the much anticipated real estate recovery? I know, I'm just borrowing trouble. Being negative. It'll never happen. You can't apply things that happend back in the day to what will happen today. That would mean you studied -- what's that course they don't teach much in school anymore -- oh yeah, history.
For more information on real estate in the Tampa Bay area, please visit my blogsite at http://www.thestpeterealestatesite.com/.
-30-
posted by Terry Ward at 4:47 AM
0 Comments:
Post a Comment
<< Home